- J McGlynn and M Bacina
US Treasury Secretary stuck with myths and mistakes in dealing with digital assets
Newly appointed US Treasury Secretary, Janet Yellen has made very bold and unfortunately mistaken comments which inform her regrettable and outdated view of digital assets, falling into a long debunked but persistent narrative that these innovative products are only used for illicit purposes.
Confirming her reputation as a crypto-critic, during her recent virtual confirmation hearing before the US Senate, she said:
I think many [cryptocurrencies] are used, at least in transactions sense, mainly for illicit financing and I think we really need to examine ways in which we can curtail their use and make sure that money laundering doesn’t occur through those channels.
We recently covered the Chainalysis' 2021 Crypto Crime Report, which found that out of the 68.42 million blockchain wallet users that exist to date, in 2020 just 270 of those wallets were involved in the majority of illicit purposes, and even then only 10% of transactions in those wallets involved illicit funds. As a result, it appears that even these wallet owners aren’t using digital assets for “mainly illicit deals”, contrary to Yellen's suggestions.
US authorities, however, appear to take have a more positive view of digital assets than Yellen. The US Securities and Exchange Commission (SEC) has recently released a digital asset memo with the reported “purpose of assisting firms dealing with digital asset securities in developing and enhancing their compliance practices”. By identifying common risks and issues that firms dealing with assets may come across in practice, the report represents a willingness by authorities to assist these types of firms to be a lot more proactive and protect themselves from running into legal trouble down the line.
The US Treasury Secretary has seemed to change her tune, perhaps in light of the SEC's support. Yellen recently commented that:
it [is] important we consider the benefits of cryptocurrencies and other digital assets, and the potential they have to improve the efficiency of the financial system.
Instead of advocating for the US to get rid of digital assets, she now speaks of “encouraging their use for legitimate activities” and her intentions to “work closely with the Federal Reserve Board and the other federal banking and securities regulators on how to implement an effective regulatory framework for these and other fintech innovations.”
With Yellen jumping on the bandwagon of an increasingly popular quest for building more robust regulation around digital assets, there emerges a clear indication that the US is becoming much less reluctant and much more willing to legitimise the digital asset space.